Housing demand unexpectedly weakened for a second month across most regions as lean inventory took a toll on affordability, putting a damper on the typically busier spring selling season, according to National Association of Realtors figures released Wednesday.
The pending home sales index fell 1.3% (the forecast was a 0.5% advance) after a 0.9% drop. The index decreased 5.4% from April 2016 on an unadjusted basis. Three of four regions showed monthly declines.
The back-to-back declines in contract signings were the first since May and June of last year and underscore how limited choices of properties are impinging on the market's progress by boosting prices and creating affordability issues. At the same time, the fundamentals for housing remain solid for those with the wherewithal to pay higher asking prices.
Mortgage rates have retraced much of their post-election rise, declining in the week ended May 25 to the lowest since mid-November. Also, steady job growth and gradual, if unimpressive, wage gains also are helping.
"Prospective buyers are feeling the double whammy this spring of inventory that's down 9% from a year ago and price appreciation that's much faster than any rise they've likely seen in their income," Lawrence Yun, NAR's chief economist, said in a statement.
Purchase contracts decreased 4.7% in the Midwest, 2.7% in the South and 1.7% in the Northeast; signings in the West advanced 5.8%. The year-over-year decline was the largest since a 9.1% drop in August 2014. Yun says there is little evidence low supply levels will dissipate quickly and he projects 5.64 million previously owned homes will sell this year, up 3.5% from 2016.
